Monday, 10 May 2010

News from the Land of Unproduction

Venezuela has been a primarily oil exporting country for over 80 years now. It had been importing most manufactured products of some complexity for decades. Still, there were some industries. The manufacturing sector concretely was trying to take off in the late eighties and early nineties. We actually saw an increase in exports in textiles and even some rudamentary electronic products started to be exported to neighbouring countries back then. That is all gone. Rualca, a company producing alluminum wheels and other metal products, was exporting over 95% of its production in the early 90s but became a shadow of itself when Chávez came to power. It was recently taken over by the State.

Some weeks ago we heard Venezuela was importing coffee for the first time in history. We are not only importing German X ray machines or US cars, we are not only importing Chinese toys or Japanese radios. We are not only importing EU meat or New Zealand milk. We are not only importing all kinds of textiles and nappies as we started to do big time since Chávez is in power. We are also importing what once was the main source of export revenue: coffee. Actually, Chávez announced we would be importing black beans as well, which is as if Spain were importing olives or chorizo.

Opposition leader Borges just talked about the record scarcity of coffee and rice. The government regime accussed the private entrepreneurs of provoking scarcity and then took over several of their factories. The same happened with rice. The result is that coffee and rice production, already declining because of all attacks on private property, investment and pricing, has collapsed. This year Venezuela is importing coffee and rice. The Chávez government controls 80% of the coffee and 70% of the rice production now, so it cannot blame it on the capitalists.

According to an article by Reuters, the latest coffee production year resulted in at most 1200000 quintales. Each quintal or coffee sack contain 46 kg of coffee. That means there was a production of 55200000 kg (probably less). The Encyclopaedia Britannica of 1907 tells us that Venezuela was producing 42806000 kilograms of coffee in 1907. Back in 1907 there were some 2.5 million people in Venezuela. Now there are 28 million. Of course, when you have a commodity that can be easily extracted by mechanical work and a few thousand people and you get big money for that, you are going to focus on that...but not in such a way as in Venezuela. Mind: coffee plantations are much more productive in 2010 with 2010 technology than in 1907 and you just need a tiny fraction of the workers you needed over 100 years ago. I am definitely NOT advocating for focusing on coffee. I just want to point out to the fact we cannot even keep up with production of something as basic and as easy to grow in Venezuela as coffee. Venezuela must diversify its production into manufacturing. Don't expect us to get much help from anyone but ourselves. The EU and China, the US and Japan would prefer to see Venezuela as an oil exporting country as now...or in the best case scenario, as their destination for so-called eco-tourism. But I digress.

Chávez got over 12 billion dollars in loans from China last year on condition of selling off cheap oil for many years to come. Some weeks ago we wrote here about the new loans for over 20 billion dollars (actually, half of it in yuan purchases). Now Chávez is announcing new oil deals with the US, Japan and other countries. Once we get the details of those deals we are going to see once more that Chávez, while accussing previous administration of being laceys to foreign powers, is actually selling off Venezuela in the most damaging way we had seen since the times of another civic-military government, that of Juan Vicente Gómez. Many people still think the Chávez government will collapse as it will run out of cash soon. They don't see that 1) Chávez will be able to get much more cash for many years because he is ready to sell off Venezuela's future for many decades - there is the oil, the gold, the gas, the forest resources for others to take - and 2) Chavista officials are already blaming economic woes on an imaginary Cuban-luke embargo.

Former Chávez supporter Ow wrote an article about how even Chávez does not buy Venezuelan products. But Chávez just announced another "Chinese-Venezuelan" company that will produce millions of mobile phones. Will that company become as "succesful" as the Chinese-Venezuelan computer factory?

For comparison, look at the coffee production in Venezuela next to Colombia's. There was a huge varience in the early XX century, with Colombia sometimes producing much more or much less than Venezuela but that was about the average, see here and here. Colombia is still much poorer than Venezuela, but at least it is producing not just coffee (and tragically, cocaine that Europeans and US Americans buy), but it is self-sufficient in food and due to a better education system than Venezuela's (anything is better in South America to the education the average Venezuelan gets), it has more chances to diversify and adapt to the future. Let's not compare Venezuela to Brazil or Chile for the moment. It would become too sad.

Coffee production in Venezuela and Colombia

Population growth in Colombia and Venezuela

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